Abel and Baker decided to form a partnership. Abel contributed equipment (book value $65,000), inventory (paid $20,000), and $10,000 cash. The equipment and inventory have a current market value of $40,000 and $15,000, respectively. Abel also had a debt of $20,000 for the equipment. Baker contributed office equipment (book value $20,000) and cash of $50,000. The current market value of the office equipment is $10,000. The two partners fail to agree on a profit-and-loss-sharing ratio. For the first month (June), the partnership lost $4,000.

1. How much of this loss goes to Abel? How much goes to Baker?

2. The partners withdrew no assets during June. What is each partners Capital balance at June 30? Prepare a T-account for each partners Capital.

3 Partners profits, losses, and Capital balances

2. Baker Capital, $58,000